Our role in promoting foreign trade
As a subsidiary of the promotional bank KfW we are committed to the German and European economy. For around 60 years we have been supporting the export economy in many different ways.
Our medium and long-term financing solutions are tailored to the specific needs of our customers who range from internationally oriented large companies to medium-sized enterprises.
On behalf of the German federal government we implement two export promotion programmes:
- the to finance German exports to developing and emerging countries
- the to support the German shipbuilding industry
Policy advice on matters relating to the promotion of international trade:
How does export credit insurance support export transactions?
Interview with Dr Nadja Marschhausen, Head of Structuring Advisory at KfW IPEX-Bank
The total volume of exports passed the trillion mark years ago. The Federal Government also supports German exports – for example, through guarantees provided by the export credit insurer Euler Hermes Deutschland, which has a mandate to carry out this task. "These are an important building block in the area of export finance," said Dr Nadja Marschhausen, Head of Structuring Advisory at KfW IPEX-Bank, speaking in an interview.
Germany is often described as a world-champion exporter. What do exporters need to remain competitive in the long term?
As long as Germany retains its technological edge and leadership in terms of quality, these will remain good selling points for its export industry. However, it is also important to complement these advantages with appropriate financing instruments such as CIRR loans (Commercial Interest Reference Rate) and other sources of funding, especially in the case of projects in high-risk countries without functioning finance markets. ECA (export credit agency) cover is an effective tool to promote exports. In Germany, the insurer Euler Hermes has a mandate from the Federal Government to provide such cover.
How does ECA cover work?
ECA cover is a tool to promote foreign trade. It is a form of state insurance which provides banks with cover for borrower default: If a borrower fails to keep up with its payments to the bank, the ECA insurance steps in. In the event of default, the bank pays a deductible, which is normally 5 % of the loan amount.
What is the benefit for exporters?
It is easier for them to sell their products, since the foreign buyer normally needs debt capital to purchase goods and services. Banks often only provide this with an appropriate level of cover. Especially in the case of exports to countries where access to financing is difficult, the export financing sometimes only comes about when ECA cover is provided.
What opportunities are there for small and medium-sized enterprises – can they benefit from Hermes cover, too?
Small and medium-sized enterprises (SMEs) can use the entire range of Hermes products just like large exporters do. According to Euler Hermes, three out of every four insurance applications come from small companies. That’s 30,000 applications a year in total. In many cases, this involves smaller transactions with short payment terms, but SMEs are also often involved in large projects as a subcontractor. In any case, small-scale order values that are eligible for cover require further development. The aim must be to create reproducible financing structures that are in line with costs.
What do you believe are the current trends in export credit finance?
In the international marketplace, the export economy defines the spirit and pace of export finance. Exporters and banks are faced with the fact that more and more growth markets and business potential are to be found in high-risk countries. According to Euler Hermes, the share of new cover in developing and emerging countries is continually on the rise. The increase in cover options for selected countries in Sub-Sahara Africa and the re-establishment of cover options for Argentina are both welcome examples of this. It is particularly important here to check carefully whether the risks involved are acceptable. In addition to the growing significance of international value chains and the trend towards global sourcing of components and supplies for large projects and facilities, we are also witnessing rising demand for financing backed by cover from multiple ECAs at the same time (referred to as ‘multisourcing’) and ‘shopping lines’, prompting the respective export credit agencies to increase cooperation and align their general terms and conditions.